In a multi-seller electronic marketplace, a plurality of sellers can list its inventory and buyers can purchase either portions of the inventory or the entire inventory (through, for example, either an auction of fixed price or various other formats). A risk in this environment is generally defined as a financial loss that a party can incur as a result of participation in market activities. Typical main categories of risks taken by the sellers include non-performing buyers, fraudulent buyer activities, returns, and charge-backs.
Examples of risks buyers potentially incur by participation in the electronic marketplace include fraudulent sellers (e.g., an item not being received), or simply dishonest sellers (e.g., the seller intentionally providing an inaccurate description of an inventory or providing a misleading description of the inventory placed for auction or sale).
Operators of electronic marketplaces attempt to mitigate and minimize risk to all participants in the marketplace, especially if the marketplace operator takes on the risk on behalf of, for example, buyers by providing various types of financial guarantees. Consequently, the marketplace operator must actively determine and mitigate risk.